Up to £40 billion of extra investment is likely in the UK oil and gas industry as a result of measures announced by Chancellor George Osborne in his budget this week.

Umbrella organisation Oil & Gas UK welcomed £3 billion in new field allowance to help develop deep water fields to the west of Shetland and proposals by the government to seek deals on tax relief for the decommissioning of old North Sea platforms.

Chief executive Malcolm Webb, who described the Treasury moves as a “turning point” for the industry, said: “Oil & Gas UK is greatly encouraged by the package of tax measures announced by the Chancellor which together will result in tens of billions of pounds of additional investment to develop the UK’s economically important oil and gas reserves, all at no net cost to the exchequer. The changes announced are the result of over a year of constructive, collaborative work and reflect the Treasury’s proper and considered approach to the industry’s proposals.

“The introduction of legislation to enable the government to give the industry certainty on tax relief on decommissioning costs is a very significant step forward. The measure should delay decommissioning of oil and gas infrastructure, give rise over time to up to £40 billion of extra investment and result in the recovery of an additional 1.7 billion barrels of oil and gas. The exchequer could receive an extra billion pounds of tax revenues in the first five years alone. Oil & Gas UK will engage strongly in the Treasury consultation over the coming months to help ensure that the details of the measure are established to best effect.”

Mr Webb added: “The immediate extension of the field allowance regime to deep fields west of Shetland and to a wider range of small fields, together with the promise of an allowance for new investment in existing fields and infrastructure, also stand to provide a welcome boost to the UK economy.”

Mr Osborne told parliament he was determined that Britain should extract the greatest amount of oil and gas reserves possible at a time of soaring global prices. Brent crude was trading this week at around $125 a barrel.

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